Nigel Latta: No magic bullet for housing crisis
OPINION: I recently went back to the house I grew up in: a pretty modest brick place on Arthur St, Oamaru.
Out in the yard, the current owners had a surprise for me. It was a tiny name, scratched in the cement foundations of a fence post.
The name was Nigel Latta. When I took a stick to the wet concrete back in 1970, I was putting my name on the place I called home.
That house on Arthur St felt stable and secure. Although we moved away when I was seven, I probably thought I'd live there forever. I didn't know a single family who rented their house.
These days, too many kids don't have the sense of stability I enjoyed. They don't get to lay claim to their home like I did. That's because their parents don't own the house they're living in; they've been locked out of an overheated housing market.
Arthur St was my parents' first house, and they bought it for about $8000 in the mid-60s. That was about three times what my dad earned in a year, which by international standards is classed as affordable.
These days, the average New Zealand house costs about six times the average household's income of $84,000. That's classed as severely unaffordable.
Our housing market is out of control. I could go on quoting figures at you, but unless you've been living in a hole (not as unlikely as it might have been), you'll have some idea of the problem. It's in the news almost every day.
Auckland dominates a lot of this coverage, and for good reason: the average house price up here recently reached a, frankly, ridiculous $1 million. But it's not just a problem for our biggest city.
Wellington, Nelson, Hamilton, Christchurch, and Tauranga are also classed as severely unaffordable on a global scale, with prices ranging from five to six-and-a-half times the average household income.
In my parents' day, most people believed that if you worked hard you could own your own home. That's just not true any more. Saving for a deposit and servicing a mortgage is getting beyond even households on moderate incomes in our urban areas.
Filming this week's episode of The Hard Stuff, I talked to a couple living in east Auckland called Sam and Linda. Sam's a construction manager and Linda is a vet, and they have two daughters. They can't afford to buy a house.
Instead, like around half of Auckland's population, they're renting, and they're pretty much resigned to renting for the rest of their lives.
Having these big chunks of the population renting houses is pretty new to New Zealand, and perhaps as a result we haven't developed much of a renting culture. Renting has been seen as something you do when you're young: you get a flat and you bounce around for a bit and then you settle down and buy a place. For many Kiwis, that's no longer how it works: renting is for life.
Some people would say our lifetime renters just aren't trying hard enough. They'd argue they're just being picky, that they're having too many lattes. I think that's complete nonsense. It's actually insulting. House prices are increasing faster than people can save - you could never, ever have a coffee and it still wouldn't get you any closer to home ownership.
If we're going to come up with a solution to this problem, we need to move beyond blaming others, or magic bullet thinking. House prices haven't tripled in the past 50 years because of one single thing. A whole range of factors have been in play.
The costs of materials, land, and labour have all exploded. More than anything, though, it's a supply issue. We just aren't building enough houses for our growing population.
On top of that, the houses we are building aren't really fit for purpose. In 1974 the average house was just over 100 square metres. These days, the average new house is double that size, even though families have actually gotten smaller since then. New Zealand has the third largest homes in the OECD, behind the US and Canada. These big houses cost more to build, they take up more land, and that makes them more expensive. As architecture lecturer Bill McKay says, building is expensive, but middle-class taste is even more expensive.
Investment hasn't exactly helped the situation, either. I have absolutely no issue with investing in property. If you can, it's a smart thing to do - an absolutely amazing investment. In fact, it's almost too amazing; it's not taxed like other investments, and once you've bought one property the banks will let you borrow against the capital gains you're making on it to buy more properties. That means first-time buyers are at a massive disadvantage compared with investors. 40 per cent of houses sold in Auckland go to property investors.
This crisis is also the result of decades of poor planning that has made it difficult and expensive to build places to live. The amount councils charge for building stuff is just insane. What is that money for, exactly? We should be making it easier for people to build new houses.
With such a complex range of causes, it's ridiculous to expect a single solution to fix the problem. Despite what some politicians would tell you, that just isn't going to happen. It's time to accept there isn't a magic bullet.
There are some changes we could make that I think would help, though. These seem kind of obvious and reasonable: a proper capital gains tax that makes investing in property a little less attractive; building smaller, better-designed, more affordable homes; looking at ways councils and bureaucracy get in the way of building more houses; making sure our young people are learning the skills they need to actually build new houses.
Whatever we do, it's still going to take a long time for houses to become more affordable. It could be 25 years before the problem is solved. In the meantime, how do we help the generation of families stuck renting?
I think we urgently need better laws to protect tenants.
One of the major disadvantages to renting in this country is that you don't get that same sense of stability you get from owning your own place. You want your kids to go to school at the same school, you put down roots and make friends in your neighbourhood. But it's hard to feel like you can do that if you haven't got a guaranteed tenancy. If your landlord can just say, "I'm selling the house', or "I'm raising the rent", and you have to leave, it's hard to feel settled.
In other countries, where long-term renting is more normal, tenants sign lease agreements that last five or six years. In Germany, it's actually illegal for your landlord to put rent up. I think that as long as you're a good tenant and you pay your rent and look after the property, you should be able to stay there for as long as your kids go to school.
This kind of talk worries some property investors because they think tenants will have too many rights. Property isn't like other forms of investment, though. If you're investing in a place where human beings are going to live, I think there are certain responsibilities that come with that. You have to provide healthy, dry homes for humans to live in, and if that means you have to improve it, then you either do that or you find something else to invest in. You're providing a home for someone, not just a building.
New Zealand's rental housing stock is in a pretty appalling state, and it's largely because of bad design. We've got this idea that because we've got this housing crisis we need to build places that are fast and cheap, and that means they can't be lovely. But you can actually build a place that is fast and cheap and lovely. People are doing it. Architects like Dave Strachan have come up with places you can build cheaply and quickly, and they're nice places to live in.
Shelter is a human necessity, but a home is about more than just keeping the rain and wind out. It's about certainty. It's about knowing that you can leave your stuff there, and it won't have gone when you get home. It's about putting down roots in a community, because that's what human beings want to do. We want to scratch our name on the place we call ours.
Just because you can't afford to buy a house, doesn't mean you should be denied a home.
CASE STUDY: YOUNG HOMEOWNERS STRUGGLING TO GET INTO THE MARKET
Linda and Sam are one of the young couples our out-of-control housing market is shutting out of home ownership.
They live in a rental with their two daughters in east Auckland. Sam works in construction and Linda runs a vet practice.
Each week, about a third of their very respectable income goes on rent. They've just about given up on buying a house.
"The house prices are just too expensive, it's just too hard to save enough for a deposit and too hard to pay a mortgage," Linda says.
She says it's hard to see the rent leaving their bank account every week and to not have anything to show for it. She wants to have something for their kids to inherit one day.
"It's sad to think that we're not going to have that security that I think, as a parent, you should be able to provide for your kids. That's tough."
They could shift to a cheaper area, but that would mean leaving their jobs, making their eldest daughter change schools,and living away from family.They might not end up any better off.
"I feel it's unfair to have to move out of what is home just to be able to get on to the housing market. That seems unfair," Linda says.
In the last 12 years, they've lived in around six houses. They've held onto their current rental for three-and-a-half years to give the children a more stable upbringing.
Their eldest daughter, who is five, "definitely knows that this isn't our house", Linda says.
If she does something that might have caused some damage to the house - and with young kids, that's pretty much inevitable - she'll ask her mum if they're going to get kicked out.
Some people might say Sam and Linda just haven't tried hard enough. They haven't made enough sacrifices.
Sam disagrees. "I don't think that's right. Look, we live within our means, but we still have to enjoy our life. I couldn't have imagined spending the last ten years scrimping and saving, and every time you're getting ahead the prices are going up. We're sort of resigned to the fact that it might not happen. At the moment, it's not even a possibility."
"I think growing up as a Kiwi you're entitled to enjoy what we've got, rather than just being stuck as a slave paying that mortgage off."
- Sunday Star Times